Consolidation seen ahead of key US jobs report

STOCKS are seen continuing to consolidate this week, but investors will likely take cues from economic data out of the US for hints on the timing of a rate hike in the world’s largest economy, as well as a stream of first-quarter corporate earnings reports.

“We’ll see a continuation of the consolidation. We’re still trying to settle down because we’ve broken the previous support,” Luis A. Limlingan, business development head at Regina Capital Development Corp., said in a phone interview.

“Having pierced 7,800 and further to 7,700, buyers might bid for time to wait for gauges to settle at a firmer plane. Contrarians, however, might see this as good timing to buy, as brave players sift on headline feeds on the timing of the Fed’s rate hike,” F. Yap Securities, Inc. said in its weekly outlook, referring to the US Federal Reserve.

The Philippine Stock Exchange index (PSEi) lost 2.9% last week, ending the shortened trading week with a three-day slump to close at 7,714.82 on Thursday.

Bulk of last week’s losses were sustained on Thursday when investors reacted to reports of anemic US economic growth and the Fed leaving open the possibility of its first interest rate hike since 2006.

“Several will heed for data on wage trend and employment to get an improved glimpse on the timing of an anticipated Fed rate hike. For now, local equities might be primed for further sell- offs, as any piece of data that could strengthen the case for an interest rate hike could entice funds in alternative securities markets,” F. Yap Securities said.

The US is scheduled to release this week its April nonfarm payrolls report, a closely watched gauge of labor market activity.

On Friday, US stocks rebounded sharply from the prior day’s sell- off, as investors picked up oversold stocks in the health care and technology sectors.

The Dow Jones industrial average climbed 183.54 points or 1.03% to 18,024.06, while the Standard & Poor’s 500 advanced 22.78 points per 1.09% to 2,108.29. The Nasdaq composite index also rose 63.97 points or 1.29% to 5,005.39.

Corporate earnings may play a key role in getting local equities out of their slump as investors have expressed concerns on the Philippine market’s lofty valuation.

Index heavyweight Philippine Long Distance Telephone Co. (PLDT) is among the companies that are scheduled to report quarterly earnings results this week.

“So far, companies that have reported earnings are in line with expectations. Looking into earn- ings, this may play a role if the index can bounce back,” Alexander Adrian O. Tiu, research analyst at AB Capital Securities, Inc., said in a phone interview.

“We’re still expensive relative to the rest of the world — that’s a turn off for foreign investors. As long as there’s internal growth, the index will be supported.”

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